Buying Cool and Fashion Economics

The most humorous piece of news, yesterday, was that Motorola CEO Ed Zander was quoted saying 'Screw the nano', voicing his frustration that Apple's latest iPod was upstaging the Motorola ROKR, their iTunes powered phone.  Apparently, Motorola is learning what Hewlett Packard, who tried to sell an HP-branded iPod, already knows:  you can't simply buy or license cool.  Changing the letters AZ in RAZR (which was cool) into the letters OK, is well, just ok.

The world of fashion, to which the iPod belongs as much as the tech-world, offers a lot of instructive lessons to analysts and economists.  High-school cliques demonstrate the concept of signaling...with the color of your hair, or the way you wear your Abercrombie hat, you let everyone know what kind of music you listen to, and what you like to do on a Friday night, efficiently skipping the awkward "getting to know you" part of making new friends. 

Of course, branding is everything when two pairs of bluejeans that cost the same amount to make get sold for staggeringly different amounts.  Meanwhile, the question of which label has the strongest brand is not an easy one.  Lesser analysts might point to the most-expensive richest label and declare their brand to be the most valuable, but if it takes untold millions in sponsorships, endorsements, and magazine spreads every year to support the label then perhaps the brand isn't so valuable.

Yesterday we talked about the concept of network effects, and yes, that applies here too, both on the way up and on the way down.  The iPod franchise has become more and more valuable as more and more people wear them, making them an indisputable sign of being hip.  This is part of the reason why they haven't taken the margin hits that some have expected. 

But can Apple keep dictating what's cool to the masses?  When President Bush, and high-school English teachers are rocking their "ear buds" are those added participants helping or detracting from the value of the iPod.  Inevitably, the forces of fashion rebelliousness take hold, and start looking for an alternative.  I'm guessing that before long a new techno, multi-function gem will appear from The East, with limited DRM, and a sleek form-factor that the early adopter geeks will go nuts for as they sneer at the iPodsters.

The longer the iPod reigns, the stronger the counter-trend will be when it hits.   The long reign of Windows, in the computing space, has provided wind to the sails of their competitors who get away with things that would make even the fiercest anti-Redmond activist blush (like putting ads in your email, and limiting your ability to play music to devices of a single maker).

Many analysts would suggest that Apple should continue licensing out iTunes to other makers, and continue their efforts to become a platform--like Tivo should have done and Research in Motion is doing.  But I think these deals hurt Apple, letting the dorky kids be part of the club without even making them learning the secret handshake...just letting them buy their way in.

Comments

[cheap computers]

I can completely relate. I, too, was struggling with the Blackberry/iPhone decision. The issues you bring up are right there with the ones I was thinking about (see www.misadventuresofasupermommy.blogspot.com). I really don't like AT had been with Verizon my whole cell phone life (does anyone else remember when it was Core Comm?); let my contract lapse while I lived in indecision. Worried about the touchscreen...

[used computers]

Why should conference proceedings be published in book format only? Would it not better serve the academic community to increase the visibility of research via open access online publishing? It would surely be better for authors, whose research will be more widely read. It would be better for other researchers who will have access to more research. For the conference organizer there could well be the benefit of being able to attract more and better authors who appreciate the benefits of online publishing of their research.

[Recepti]

Though colors and patterns of textiles changed from year to year, the cut of a gentleman's coat and the length of his waistcoat, or the pattern to which a lady's dress was cut changed more slowly.

[best price for gold]

i love to play with colors... thats my hobby... it gives me immense peace and happiness...